Uninsured/Underinsured Motorist Coverage and Anti-Stacking Provisions
August 2009
Upon surveying state statutes and caselaw,
there are a wide range of opinions on the propriety of stacking policies in
the area of uninsured/underinsured motorist coverage. State stances on the
stacking versus anti-stacking issue range from state-mandated stacking
through statute to state-prohibited stacking by statute and several in
between.
by R. Brent
Cooper
Cooper & Scully
This is a significant question because insureds want to stack the
policies to obtain a full recovery for their actual damages. If
anti-stacking provisions do violate public policy, insurers should consider
that their exposure may be higher when negotiating multiple vehicle coverage
auto policies.
Two or More Auto Policies
On March 27, 2009, the Texas Supreme Court entered its per curiam opinion
in Progressive Cty. Mut. Ins. Co. v. Kelley,
2009 Tex. LEXIS 110 52, Tex. Sup. J. 488 (Tex. 2009). The court remanded the
case for a fact finding on the issue of whether the two documents involved
in the dispute constituted one policy or two separate policies. Because a
fact finding was needed on this issue, the court did not reach the more
significant question in the case, whether the "two or more auto policies"
provision prevents the insured from "stacking" two policies.
The "two or more auto policies" provision at issue in
Progressive v. Kelley reads:
If this policy and any other auto insurance policy issued to you
by us apply to the same accident, the maximum limit of our liability under
all the policies shall not exceed the highest applicable limit of liability
under one policy.
This is the first case to specifically address a "two or more auto
policies" provision in Texas. Though the Texas Supreme Court did not reach
this issue in this case, in other cases and in other courts, there has been
discussion concerning the uninsured/underinsured motorist statute's intended
purpose and whether policy provisions frustrate those purposes.
The Texas Supreme Court held that one way a policy provision can
frustrate the uninsured/underinsured motorist statute's intended purpose is
by limiting the possibility that an injured insured can recover actual
damages. Stracener v. United Servs. Auto. Assoc.,
777 S.W.2d 378, 383 (Tex. 1989), Mid-Century Ins.
Co. v. Kidd, 997 S.W.2d 265, 276 (Tex. 1999). Clauses in insurance
policies which are not consistent with and do not further the purpose of the
uninsured/underinsured motorist statute are invalid.
Stracener at 384. Multiple policies may be stacked even though issued
by the same insurer to the same insured for damages arising out of the same
accident. United Services Auto. Ass'n v. Hestilow,
754 S.W.2d 754, 757-59 (Tex. App.—San Antonio 1988),
aff'd, 777 S.W.2d 378 (Tex. 1989);
Travelers Indem. Co. v. Lucas, 678 S.W.2d
732. 735 (Tex. App.—Texarkana 1984, no writ).
Progressive v. Kelley
The insured in Progressive v. Kelley
alleged her medical bills were over $1 million. The underinsured's driver's
limits were $100,000, and $500,025 would have been available under each
Progressive policy, if there were indeed two, and if the courts held the
"two or more auto policies" provision invalid. The insured would therefore
need to be able to recover under each Progressive policy to be fully
compensated for the medical expenses, meaning that the "two or more auto
policies" provision arguably would frustrate the purpose of the uninsured
motorist statute by limiting the possibility that an injured insured can
recover actual damages.
The Texas statute does not speak specifically to the stacking issue, but,
as evidenced in the caselaw, the courts have expressed a clear understanding
that the purpose of the statute is that insureds recover for their actual
damages and that a policy provision preventing full recovery conflicts with
that public policy and is thus invalid. Therefore, it appears that in Texas,
the "two or more auto policies" provision, when coupled with the intent and
purpose of the uninsured motorist statute, will not operate to prevent
stacking where the insured has two policies with an insurer and their actual
damages are greater than the maximum recovery under one policy's
uninsured/underinsured motorist coverage.
State Stacking Positions
There are some states which allow anti-stacking if certain requirements
are met. In Florida, per statute, stacking is only allowed if certain notice
requirements are fulfilled by the insured, and the insurer is required to
revise premium rates to reflect a reduction in the uninsured motorist
coverage premium of at least 20 percent for policies with such stacking
limitations. See Fla. Stat. § 627727(1);
Rando v. Government Employees Ins. Co., 556
F.3d 1173 (11th Cir. 2009). Nevada's statute permits insurers to limit
stacking, but provides that any such limiting provision must meet three
requirements: clarity, prominence, and the insured cannot "have purchased
separate coverage on the same risk nor paid a premium calculated for full
reimbursement under that coverage." Dairyland v.
Emens, 2008 U.S. Dist. LEXIS 51425 (D.C. Nev. 2008).
Many states, like Texas, do not have insurance code provisions speaking
directly to whether anti-stacking provisions are valid. In Missouri, there
is no statute speaking specifically to stacking, but the courts are inclined
to find anti-stacking provisions ambiguous, and therefore construe them in
favor of finding coverage. It necessarily follows, however, that where an
anti-stacking provision is clear and unambiguous, it will operate to prevent
stacking in Missouri. Bolin v. Progressive
Northwestern Ins. Co., 2009 U.S. Dist. LEXIS 30234 (E.D. Mo. 2009).
Ohio courts hold clear and unambiguous anti-stacking provisions to be
fully enforceable. Nationwide Mut. Fire Ins. Co. v.
Wood, 2008 Ohio App. LEXIS 3648 (Civ. App. 9th Dist. Ohio, 2008).
Virginia courts take the position that stacking will be allowed unless clear
and unambiguous language on the face of the policy exists to prevent it.
Virginia Farm Bureau Mut. Ins. Co. v. Williams,
677 S.E.2d 299 (Va. 2009).
An Oklahoma case construing an insurance policy entered into in Arkansas
under the provisions of Arkansas law held that in Arkansas, anti-stacking
provisions are valid and enforceable. Howe v. Carter,
2008 U.S. Dist. LEXIS 91082 (N.D. Okla. 2008). Montana courts hold that
anti-stacking provisions violate public policy and are therefore invalid.
See Tenas v.
Progressive Preferred Ins. Co., 197 P.3d 990 (Mont. 2008).
Some state courts have provisions which prohibit stacking. Kansas has an
anti-stacking statute, and the Kansas Supreme Court has said that this
effectively becomes a part of the policy such that both the state statute
and insurance policies prohibit stacking. State Farm
Mut. Auto. Ins. Co. v. Oursler, 2008 U.S. Dist. LEXIS 97785 (D.C.
Kan. 2008). In Minnesota, Minn. Stat. § 65B.49 subsection 3(a)(6) is an
anti-stacking statute which prohibits insureds from stacking policies to
enhance recovery. Johnson v. Progressive Northern
Ins. Co., 2009 Minn. App. Unpub. LEXIS 195 (Civ. App. Minn. 2009).
There is at least one state that requires insurers to allow insureds to
stack coverage. The Rhode Island statute mandates the ability to stack.
Stated another way, anti-stacking provisions are not allowed by statute in
Rhode Island. R.I. Gen. Laws § 27-7-2.1(a), (i);
LaPlante v. York Ins. Co. of Me., 2008 U.S. Dist. LEXIS 6002
(D.C.R.I. 2008).
Other state courts address the issue of stacking but neither mandate nor
prohibit anti-stacking provisions in policies. In Delaware, anti-stacking
provisions are authorized by Del. C. § 3902(c). This provision clearly and
unambiguously allows anti-stacking provisions.
Bromstad-Deturk v. State Farm Mut. Auto. Ins. Co., 2009 Del. LEXIS
274 (Del. 2009). Iowa Code § 516A.2(1) permits insurers to include
anti-stacking provisions in the policies they issue. Section 516A.2(2)
allows the parties to contract for stacking. When a contract is silent, per
516A.2(3), the insured is entitled to recover up to the highest policy
limit, with no stacking of coverage. So in Iowa, the parties have permission
to stack or not to stack by statute, but the default in the absence of
specifically addressing the issue is no stacking.
Ewing v. American Nat'l Prop. & Cas. Co., 2008 Iowa App. LEXIS 98,
(Civ. App. Iowa, 2008).
Conclusion
In many states, the courts or the legislatures have spoken on the issue
of multiple auto policies and anti-stacking provisions. But others, like
Texas, have not directly addressed the issue yet. When dealing with an
anti-stacking issue, one should first determine if the particular state
legislature has spoken on the issue. If they have specifically addressed the
issue, then insureds and insurers alike should negotiate accordingly. Other
times caselaw may either directly or indirectly address the issue, such that
insurers are able to bargain accordingly with insureds who have multiple
automobiles and policies.
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